Pobreslo v. Guar. Mortg. Corp.

• Citation: 242 N.W. 725,210 Wis. 20
• Parties: POBRESLO v. GUARANTY MORTG. CORPORATION ET AL. (KARN ET AL., GARNISHEES).
• Decision Date: 10 May 1932
• Court: United States State Supreme Court of Wisconsin

210 Wis. 20

242 N.W. 725

POBRESLO

v.GUARANTY MORTG. CORPORATION ET AL. (KARN ET AL., GARNISHEES).

Supreme Court of Wisconsin.

May 10, 1932.

Appeal from a judgment of the Circuit Court for Dane County; R. S. Cowie, Circuit Judge.

Action by Mrs. J. H. Pobreslo against Joseph M. Boyd Company and the Guaranty Mortgage Corporation, wherein Clarence E. Karn and others were garnisheed. From a judgment for plaintiff, garnishees appeal.--[By Editorial Staff.]

Reversed, with directions.

This is a garnishment proceeding commenced on the 30th day of July, 1931, ancillary to an action brought by the plaintiff. The facts are not in dispute, and the judgment appealed from was rendered against the garnishee defendants pursuant to plaintiff's motion for judgment on the pleadings.

The defendant Joseph M. Boyd Company, hereinafter called the defendant, is a Wisconsin corporation which, prior to March 23, 1931, was engaged in the business of selling securities, loaning money, and selling property on credit. On March 23, 1931, being financially involved, it made a voluntary assignment of all of its property for the benefit of its creditors, to Leo T. Crowley, Clarence E. Karn, and L. D. Atkinson. The assignment was made pursuant to a resolution of its stockholders and was evidenced by a writing executed in its behalf by Joseph M. Boyd and R. H. Farness, president and assistant secretary, respectively, of the company. The three assignees mentioned, each individually in writing, accepted the assignment and the trusts thereby created. The assignees immediately took possession of all of the property of the company, and on the same day the circuit court for Dane county assumed jurisdiction over the proceeding. In the written assignment mentioned no reference was made to chapter 128 of the Wisconsin Statutes (section 128.01 et seq.), but the order signed by the circuit court, on assuming jurisdiction and supervision over the administration of the assets and property of the company, recited that it was done “pursuant to law, and particularly under and pursuant to the provisions of chapter 128 of the Statutes of the State of Wisconsin.” The assignees took possession of the company's assets before furnishing any bond. Nineteen days thereafter the three assignees filed separate bonds, each in the sum of $10,000. The total amount of the three bonds did not equal the value of the assets of the company. The value of the assets was at no time determined by the oath of witnesses as required by section 128.06, Stats. The assignees did not, in the presence of the county judge or of a court commissioner, indorse on the assignment, their consent to take upon themselves the faithful discharge of the trusts as required by law. Section 128.12, Stats. The assignors also failed to file an inventory. Section 128.13. The assignees were expressly authorized to submit themselves to the jurisdiction of the circuit court for Dane county, and said court evidently took jurisdiction of said matter under the provisions of chapter 128. The court ordered the publication of notices to creditors pursuant to section 128.14, and required the filing of proof in accordance with section 128.15. The plaintiff did not file her claim pursuant to the provisions of chapter 128, but on July 30, 1931, commenced an action against the company and also a garnishment action against the assignees. The time for answering was extended by consent of the parties. On December 4, 1931, the assignees named in said instrument dated March 23, 1931, resigned; and at the same time, pursuant to resolutions of the company, an amendment was made to the original instrument of assignment. The circuit court, on December 10, 1931, entered an order accepting the resignation of the trustees and appointed Edward J. Samp as the sole trustee for the administration of the trust. After the resignation of the three assignees and the appointment of Samp as sole trustee, the pleadings were amended so as to make him a garnishee defendant in addition to the three original assignees. Edward J. Samp, as garnishee defendant, made and filed his answer in which the assignment proceedings were recited and in which it was denied that either he or the original assignees had, at the time of the service of the garnishee summons, or at any time thereafter, possession or control of any real estate or personal property belonging to the company or in which it had any interest.

The amended assignment specifically provided that it should be “deemed a common law assignment.” The amended assignment further authorized the trustees, if they deemed it advisable, “to conduct and continue the business heretofore operated or conducted” by the company and to borrow money if they deemed it necessary for the continuance of the business. The amended assignment further provided that the assignees should “pay all debts which are by law entitled to be paid in full in priority to other debts as provided in the Acts of Congress relating to bankruptcy and in the order of priority as therein provided.” The trustees were further authorized to “postpone the sale and collection of any part of said property for such time as is consistent with reducing the same to money, until the same can be wisely and prudently done.” The amended assignment also provided, in respect to the liability of the trustees as follows: “The trustees shall not be liable for the consequences of any oversight or error in judgment, and shall be answerable only for their own acts, receipts and defaults, and not for those of any person employed by them, and selected with reasonable care, nor for any loss unless the same happens through their own wilful default.” Additional facts will appear in the opinion. The plaintiff moved for judgment against the garnishee defendants upon the plaintiff's garnishee affidavit and the affidavit and answer of the defendants. The plaintiff's motion was granted, and judgment rendered against the garnishee defendants.

Bagley, Spohn, Ross & Stevens, of Madison, for appellants.

Olin & Butler, of Madison, for respondent.

NELSON, J.

The plaintiff contends that the assignment herein is wholly void and inoperative because the assignees took immediate possession of the property and assets of the company without furnishing a bond as required by section 128.06; because the giving of the three separate bonds was not in compliance with said section for the reason that the assets of the company greatly exceeded the sum of $30,000; because the assets of the company at no time were ascertained by the oath of witnesses and of the assignor as required by section 128.06; because neither the said assignment nor a full and true copy thereof was at any time delivered to the county judge or a court commissioner; because the assignees did not, in the presence of the county judge or court commissioner, indorse upon the assignment, their consent to take upon themselves the faithful discharge of the duties specified therein; because they did not, within twenty days after the execution of the assignment, make and file, in the office of the clerk of the circuit court for Dane county, an inventory of the assets and a list of the creditors of the company as required by section 128.13; and, finally, because neither the said court nor the said trustees had jurisdiction or authority to administer the assets of the company because such jurisdiction is in conflict with the provisions of the Federal Bankruptcy Act (11 USCA).

It appears that the three separate bonds were executed and filed pursuant to the order of the court, and that in lieu of an inventory of assets and a list of creditors, a report of the company, by certified public accountants, was filed.

Various contentions are made by the parties in the carefully prepared briefs submitted by them, but in the view we take of this case but two questions require determination.

1. May the provisions of chapter 128, which pertinently relate to voluntary assignments for the benefit of creditors, be severed from the other provisions of said chapter which concededly amount to insolvency proceedings, in that they provide for the discharge of insolvent debtors?

2. If the provisions of chapter 128 regulating voluntary assignments for the benefit of creditors may be severed from the other provisions of said chapter, then are such provisions relating to such assignments for the benefit of creditors suspended so long as the Federal Bankruptcy Act shall be in force and effect, because in conflict therewith?

A careful reconsideration and review of the history of our statutes regulating voluntary assignments for the benefit of creditors and those relating to insolvency proceedings leads to the same conclusion reached in Re Voluntary Assignment of Tarnowski, 191 Wis. 279, 210 N. W. 836, 49 A. L. R. 686. In that case the development of our laws relating to assignments for the benefit of creditors, as well as those relating to our insolvency proceedings, was carefully reviewed. In that case it was contended that our statutory regulations relating to voluntary assignments for the benefit of creditors were separate and distinct from the provisions of our statutes providing for the discharge of insolvent debtors from their debts. The following cases were cited to support such contention: Binder v. McDonald, 106 Wis. 332, 82 N. W. 156;Segnitz v. Garden City B. & T. Co., 107 Wis. 171, 83 N. W. 327, 50 L. R. A. 327, 81 Am. St. Rep. 830;Duryea v. Muse, 117 Wis. 399, 94 N. W. 365. After reviewing the several enactments leading up to the then existing law, the court, speaking through Mr. Justice Owen, said (page 286 of 191 Wis., 210 N. W. 836, 838): “It follows, therefore, that the features of our voluntary assignment act are separate and distinct from the discharge features first enacted as chapter 385, Laws 1899.”

[1] A careful consideration of all of the acts of the Legislature, which are now incorporated into chapter 128 of the...